It describes how to calculate time value of money in Microsoft excel

1. TIME VALUE OF MONEY WITH MICROSOFT EXCEL
Introduction: Computer is a part and parcel in our daily life. In every sector,
computer has enough contribution in solving and instructing various problems.
Now-a-days, without computer we can not think for a single moment. Now all the
financial problem can be solved easily and rapidly by the excel function like as
financial calculators. Now the question is that how we can do it? For answer of this
question we want to select the ‘time value of money’ mission and the ways are as
follows:
Problems related to time value of money:
Different kinds of problem, we can solved easily through the Microsoft excel. A
short description of the ways to solve such problems is stated with example.
Example 1: future value of lump sums
Suppose that you have $650 to invest for a period of10 years at an interest rate of
13% per year. How much will you have accumulated at the end of this time
period?
In this problem ,the $650is the present value(PV),NPER is 10,and rate is 13%.open
a new workbook and enter the data as shown bellow, but leave B5 blank for now.
A B C D
1 Present value $650
2 Years 10
3 Annul rate 13%
4
5 Future value $2206.47`
To find the future value of this lump sum investment we will use the FV function,
which is defined as:
FV(rate,nper,pmt,pv,type)
Select cell B5 and then type:=FV(B3,B2,0,-B1) and then press enter. The answer
that you get should be $2206.47.

2. Example 2: present value of lump sums
Suppose that you will get $800 at the end of 9 years later at a rate of 11%.How
much money you should invest today?
In this problem, the $800 is future value (fv), NPER is 9, and rate is 11%. Open a
new workbook and enter the data as shown bellow, but leave B5 blank for now.
A B C D
1 Future value $800
2 Years 9
3 Annul rate 11%
4
5 Present value $312.74
To find the present value of this lump sum investment we will use the PV function,
which is defined as:
Pv(rate,Nper,pmt,fv,type)
Select cell B5 and then type:=PV(B3,B2,0,-B1)and then press enter. The answer
you will get should be $312.74.
Example 3: no of period
Suppose that you invest $2000 today and you would like to know how long it will
take you double your money to $4000.assume that you can earn 12%per year on
your investment.
In this problem ,the $2000is the present value(PV),the $4000 is the future value
(fv),and rate is 12%.open a new workbook and enter the data as shown bellow, but
leave B5 blank for now
A B C D
1 Present value $2000
2 Future value $4000
3 Rate 12%
4
5 period 6.12
To find the no of period of this lump sum investment we will use the Nper
function, which is defined as:

3. NPER(rate,pmt,pv,fv,type)
Select cell B5 and then type:=NPER(B3,0,-B1,B2)and then press enter. The
answer you will get should be 6.12 years
Example 4: solving for the interest rate
Suppose you invest $1200 today and you will get $2400 at end of 5 years. At what
rate you will get this required amount?
In this problem ,the $1200is the present value(PV),the $2400 is the future value
(fv),and no of the period is 5 years open a new workbook and enter the data as
shown bellow, but leave B5 blank for now
A B C D
1 Present value $1200
2 Future value $2400
3 period 5
4
5 rate 12.46%
To find the annul rate of this lump sum investment we will use the Rate function,
which is defined as:
Rate(nper,pmt,pv,fv,type)
Select cell B5 and then type=Rate(B3,0,-B1,B2)and then press enter. The answer
you will get should be 12.46%
Example 5: present value of annuity
Suppose that you are offered an investment that will pay you $1200 per year for 12
years. If you can earn a rate of 10% per year on similar investments, how much
should you be willing to pay for this annuity?
In this problem ,the $1200 is the payment per year ,annul rate is and no of the
period is 12 years open a new workbook and enter the data as shown bellow, but
leave B5 blank for now

4. A B C D
1 payment $1200
2 Annul rate 10%
3 period 12
4
5 Present value $6417.66
To find the present value of the annuity we will use the Rate function, which is
defined as:
PV(annul rate,years,payment)
Select cell B5 and then type=PV(B2,B3,B1)and then press enter. The answer you
will get should be$6417.66
Example 6: Future value of annuities
Now suppose that you will be borrowing $2000 each year for 8 years at a rate of
12%, and then paying back the loan immediate after receiving the last payment.
How much would have to repay?
In this problem ,the $2000 is the payment per year ,annul rate is and no of the
period is 8 years open a new workbook and enter the data as shown bellow, but
leave B5 blank for now
A B C D
1 payment $2000
2 Annul rate 12%
3 period 8
4
5 Future value $15192.93
To find the future value of the annuity we will use the Rate function, which is
defined as
Fv(rate,year,payment)
Select cell B5 and then type=Fv(B2,B3,B1)and then press enter. The answer you
will get should be$15192.93